TAIPEI — Taiwan Semiconductor Manufacturing Co. (TSMC), the world’s largest chip foundry, will snatch more orders for Apple's A9 processor at the expense of Samsung, which is having yield problems with its most advanced technology node, according to sources interviewed by EE Times.
Apple is ramping production of the A9 this year for the iPhone 6S, according to the sources. Apple, the world’s biggest company by market capitalization, originally handed Samsung about 80% of the A9 orders and the rest to TSMC, the sources say. Now the tables appear to have turned.
“We believe TSMC will get 40% of the next iPhone processors, in addition to all the next iPad processors,” said Mark Li, senior analyst with Bernstein, in a March 20 report. TSMC will get about 70% of Apple’s overall business starting in the third quarter of 2015, the report stated.
TSMC’s revenue contribution from 16nm will begin with 3% in the third quarter of this year, earlier than the company’s guidance, and jump to 12% in the fourth quarter, according to Li.
TSMC director of corporate communications Elizabeth Sun declined to comment.
Industry insiders matched Li's views. TSMC will get the majority share of the A9, said a supplier in the semiconductor equipment industry in Taiwan who requested anonymity.
According to my colleagues in South Korea, TSMC will take two-thirds and perhaps more of the A9 orders from Apple. It looks like TSMC’s 16nm yield is better than Samsung’s 14nm yield.
Neck and Neck
TSMC and Samsung have been in a neck-and-neck race to commercialize foundry production of FinFET chips for customers such as Apple and Qualcomm. The two companies lag Intel, which is making the world’s first 3D chips for internal use. In the middle of last year, Samsung appeared to have gained an advantage with its 14nm FinFET process over TSMC’s 16nm technology.
Apple should be able to walk the tightrope between the two process technologies for one product, according to Bernstein’s Li.
“This will be the first time that Apple has split the foundry service of the same processor at two suppliers,” according to Li. “We think Apple now has a very strong design team to make the variance of the chips at two foundries small enough so that regular end users can’t tell. The fact that Samsung has been repeatedly adopting different chips in the same handset model also proves this feasible.”
The next question for TSMC will be how to fulfill the Apple order, according to the Taiwan industry source.
“TSMC can allocate their internal capacity and they can also ask their tool vendors for urgent shipments,” according to the source. “Normally, tool vendors will fully support TSMC. Capacity-wise, I don’t think that TSMC will have a problem.”
Equipment suppliers such as Applied Materials, ASML, and Cymer are likely to see rush orders from TSMC to meet demand, he said.
TSMC will also need to work more closely with assembly-and-test companies such as Taiwan’s Advanced Semiconductor Engineering and Siliconware for the full solution, according to the source.
“The backend suppliers will need to build up integrated fanout lines,” he said.
Win Some, Lose Some
Even so, Samsung may have grabbed more business from TSMC at the 20nm node, according to Li.
A reported overheating issue in Qualcomm’s upcoming 20nm Snapdragon 810 is bigger and broader than originally expected, Li said. In addition to cutting its 20nm orders at TSMC, Qualcomm will accelerate its transition to 14/16nm.
Samsung is poised to become the primary supplier to Qualcomm in 14/16nm, according to Li.
As Qualcomm accounts for 40% to 50% of TSMC’s 2015 20nm demand, such a shift will make 20nm’s revenue trajectory much weaker than for prior nodes for TSMC, Li said. Although TSMC expected 20nm sales to rise each quarter this year, TSMC’s 20nm revenue contribution probably peaked in the fourth quarter last year and will quickly recede starting in the first quarter of 2015, he said.